Did Charles Keating Go to Jail for Nothing?

In perhaps the single most dramatic display of his influence on Capitol Hill, Keating, who made a total of $1.3 million in political donations to the campaign war-chests of the “Keating Five,” was able to get all five senators to meet with federal banking regulators who were conducting an especially aggressive audit of Lincoln Savings in 1987. The meetings appeared to help influence the decision of the regulators to take no serious punitive action against Keating at the time, giving him at least another year to loot the savings-and-loan.

Keating, it would also be determined, had paid himself almost $20 million in salary and other compensation during the five years that ended with Lincoln’s collapse, all the while using the savings-and-loan to underwrite an extravagant lifestyle that included a fleet of private jets and luxury homes. In the run-up to the opening of the Phoenician, he and more than a dozen members of his family used two corporate jets to ferry themselves around Europe for nearly a month as a business expense, planting themselves in some of the continent’s finest luxury hotels, supposedly to fine-tune the lodging style they wanted to establish at their new Arizona resort.

Too few of the lessons of the savings-and-loan crisis were really learned, it now seems clear to scholars of the financial industry and to some regulators. It would only be a few years after the thrift crisis had passed and Keating was sitting behind bars and out of the headlines that Congress and the White House would massively deregulate other parts of the financial industry, leading to the abuses in the mortgage and investment markets that resulted in the 2008 crisis.

There was also no lesson learned, apparently, in how to establish personal accountability in a wide-ranging financial meltdown. For many Americans, the most important and most satisfying outcome of the savings-and-loan crisis may have been the fact that individuals were ultimately held accountable for their wrongdoing. Members of the Senate found their political careers in tatters. The Justice Department and state prosecutors sent Keating and others in the thrift industry to prison.

After 2008, however, the investment bankers and other executives on Wall Street and elsewhere, who had just brought the world economy to the brink of collapse through abuses in the housing market and in the sale of mortgage-related investments, remain mostly in place. They are seemingly still confident that they will not face the fate of someone like Charles Keating—even if their decisions did even more damage to the American economy than Keating and 100 more like him could ever have done.

Philip Shenon, a former Washington correspondent for the New York Times, is author, most recently, of A Cruel and Shocking Act: The Secret History of the Kennedy Assassination.